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Testing for linear and nonlinear Granger causality in the real exchange rate–consumption relation

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  • Pavlidis, Efthymios G.
  • Paya, Ivan
  • Peel, David A.

Abstract

International real business cycle models predict a relationship between real exchange rates and consumption. This prediction is not supported by the empirical literature. In a new approach, we apply nonlinear Granger-causality tests to data for 14 OECD countries.

Suggested Citation

  • Pavlidis, Efthymios G. & Paya, Ivan & Peel, David A., 2015. "Testing for linear and nonlinear Granger causality in the real exchange rate–consumption relation," Economics Letters, Elsevier, vol. 132(C), pages 13-17.
    • Handle: RePEc:eee:ecolet:v:132:y:2015:i:c:p:13-17
    DOI: 10.1016/j.econlet.2015.04.008
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    Cited by:

    1. Daiki Maki & Yasushi Ota, 2019. "Robust tests for ARCH in the presence of the misspecified conditional mean: A comparison of nonparametric approches," Papers 1907.12752, arXiv.org, revised Sep 2019.
    2. Okwu, Andy & Akpa, Emeka & Oseni, Isiaq & Obiakor, Rowland, 2020. "Oil Export Revenue and Exchange Rate: An Investigation of Asymmetric Effects on Households’ Consumption Expenditure in Nigeria," MPRA Paper 102080, University Library of Munich, Germany.
    3. Yao, Can-Zhong & Lin, Qing-Wen, 2017. "Recurrence plots analysis of the CNY exchange markets based on phase space reconstruction," The North American Journal of Economics and Finance, Elsevier, vol. 42(C), pages 584-596.
    4. Emmanuel Uche & Bisharat Hussain Chang & Lionel Effiom, 2023. "Household consumption and exchange rate extreme dynamics: Multiple asymmetric threshold non‐linear autoregressive distributed lag model perspective," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 3437-3450, July.

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    More about this item

    Keywords

    Nonlinear Granger causality; Real exchange rates; Consumption; Heteroskedasticity robust test;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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